After an epic year in 2020, high-flying tech stocks continue to trade down to kick off 2021. Rising interest rates are to blame. However, this situation doesn’t reduce the actual growth prospects for these businesses. For investors eyeing the long-term potential, the recent sell-off spells opportunity. To that end, three Fool.com contributors recently purchased PayPal Holdings (NASDAQ: PYPL), Lemonade (NYSE: LMND), and TS Innovation Acquisitions (NASDAQ: TSIA) during the downturn. Here’s why.
Nicholas Rossolillo (PayPal Holdings): PayPal had a great year last year. Thanks to booming e-commerce and rapid adoption of its mobile money movement app, Venmo, among consumers and merchants alike, the company notched a 22% increase in revenue and a 48% increase in free cash flow in 2020. To illustrate how massive this fintech ecosystem has gotten, total payment volume processed on a PayPal service was nearly $1 trillion last year.
PayPal’s growth story is far from finished, though. It expects payment volume to increase in the high 20% range this year. It’s also making strategic bets on new forms of digital payments, blockchain technology, and cryptocurrency trading — recently announcing the acquisition of cryptocurrency infrastructure start-up Curv. In spite of all this momentum, PayPal was caught up in the tech stock sell-off, at one point falling some 30% from all-time highs. Adding to the pain was news that funds managed by prominent institutional investor Cathie Wood sold some shares (perhaps due to short-term client liquidation of funds, or perhaps just to rebalance after PayPal stock more than doubled in value since the beginning of 2020).